Fintech cheers Sebi’s call for MF rules

Sebi's proposal to create a self-regulatory organization to regulate the mutual fund industry has opened new opportunities for the fintech startupsPratik Bhakta | ET Tech | April 05, 2019, 05:10 IST

The proposal from Sebi (Securities and Exchange Board of India) to create a self-regulatory organisation (SRO) to regulate the mutual fund industry has opened new opportunities for the fintech startups trying to drive investments online.

Entrepreneurs who want to take mutual fund investments to the next 100 million users using technology are hoping to get ample representation in the industry regulatory bodies since the future of investment distribution is digital, they say.

“With the number of players selling mutual fund products swelling everyday there was a dire need for the regulator to step in to prevent misspelling and an SRO can help regulate this space better,” said Nithin Kamath, chief executive officer, Zerodha which offers mutual fund investments through Coin. “An industry association like AMFI can potentially become an SRO.”

Sebi in its discussion paper said that the markets regulator is planning to have SROs for investment advisors and distributors who would act as the first stage of implementation of regulations for the space. Responding to Sebi’s proposal for inputs from the industry, multiple fintech startups told ET they would be sending in suggestions.

“There is a need to have separate representations from each of the stakeholders of the distribution business, agents, investment advisors and fintechs and its governance should be driven through participants,” said Mukesh Kalra, chief executive officer, ETMoney. “A separate body can be formed which represents fintechs.”

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Industry executives pointed out that future of investments is technology driven therefore there is a need to have a forum which can have adequate representations from fintech players. Starting from Paytm Money to PhonePe and others like ETMoney, Zerodha, Scripbox are all technology driven investment platforms.

“There have been previous representations to the regulator where the fintech industry has demanded a separate regulatory mechanism for robo-advisory, however that is yet to materialise,” said a top executive with a fintech startup engaged in online distribution of mutual funds.

As per Sebi there are 1.24 lakh mutual fund distributors in India and 1136 investment advisors. As of February the total number of folios stood at 8.18 crore and the total assets under management for the mutual fund industry stood at Rs 23 lakh crore.